Caesars unit files amended Chapter 11 plan, eyes exclusivity extension

By Caroline Salls

Pittsburgh, Oct. 8 – Caesars Entertainment Corp. subsidiary Caesars Entertainment Operating Co., Inc. (CEOC) filed an amended Chapter 11 plan and related disclosure statement and a motion to further extend exclusivity through March 15 Wednesday with the U.S. Bankruptcy Court for the Northern District of Illinois.

According to a company news release, the amended plan provides for a comprehensive restructuring transaction that is supported by holders of more than 80% of CEOC’s first-lien bank debt and first-lien notes and provides for enhanced recoveries for junior creditors.

Specifically, CEOC said the amended plan settles litigation claims for significant contributions of cash and securities from Caesars Entertainment and improves recoveries across CEOC’s capital structure.

In addition, the plan will eliminate roughly $10 billion in total debt from CEOC’s balance sheet.

The amended plan provides for a tax-efficient corporate and balance sheet restructuring that maximizes the value of the businesses by converting CEOC into a real estate investment trust (REIT) with ongoing credit support from Caesars Entertainment, the release said.

Plan changes

According to an 8-K filed with the Securities and Exchange Commission, CEOC, as a restructured separate operating company, will syndicate, instead of issuing directly to creditors, first-lien debt and second-lien debt to the market for cash to be distributed to holders of first-lien bond claims and beneficial holders of the claims under CEOC’s first-lien bank debt.

The company said conditions to the plan effective date will include the distribution of $882 million of the proceeds from the syndication of the new first-lien operating company debt and $406 million of the proceeds from the syndication of the new second-lien operating company debt to first-lien bank lenders.

If the condition for the first-lien debt is waived, that debt will be distributed to the first-lien bank lenders in a principal amount equal to $882 million less the cash proceeds of the syndication of the new first-lien debt. If the condition to the second-lien debt is waived, that debt will be distributed to the first-lien lenders in a principal amount equal to $406 million less cash proceeds of the syndication.

The company said another condition to the effective date will be that $306 million of the proceeds from the syndication of the new first-lien debt and $141 million of the proceeds from the syndication of the new second-lien debt be distributed to first-lien noteholders.

If the condition for the first-lien debt is waived, the new first-lien debt will be distributed to the first-lien noteholders in a principal amount equal to $306 million less the cash proceeds of the syndication. If the condition for the new second-lien debt is waived, that debt will be distributed to the first-lien noteholders in a principal amount equal to $141 million less cash proceeds of the syndication.

Also under the amended plan, Caesars Palace Las Vegas (CPLV) will issue up to $2.6 billion in debt. No less than $1.8 billion of that debt will be sold to third-party investors for cash proceeds.

CEOC said the amendment modifies the cap on the weighted average yield on the CPLV market debt and CPLV mezzanine debt to provide that the annual debt service remains at $130 million, but that amount now will be reduced by every dollar of second-lien debt of CEOC as a restructured property company that is issued to first-lien lenders, multiplied by 0.072072072. However, the cap will not be reduced below $106 million.

Also, Caesars Entertainment has agreed to pay a share of an upfront payment to each consenting creditor that was a signatory to the first-lien bond restructuring support agreement on or before Jan. 15, 2015 and that held any first-lien bank claims at 10 a.m. ET on Sept. 8.

Under the amended plan, the right of non-first-lien noteholders to participate in purchasing the right to receive additional shares of property company common stock was eliminated.

Caesars Entertainment has also agreed to reimburse CEOC for any dilution of available cash otherwise payable to first-lien noteholders as adequate protection payments caused by the payment of specified forbearance fees. CEOC will then pay the reimbursement amount to first-lien noteholders.

Consensus sought

Now that it has obtained the support of about $12 billion, or two-thirds, of its capital structure, CEOC said it can continue its ongoing efforts to seek consensus with its junior creditors while also pursuing a path to emergence consistent with agreed upon milestones.

The company said it is not seeking a hearing to approve the disclosure statement and solicit votes on the amended plan at this time. Under an existing court order related to the ongoing investigation by a court-appointed Chapter 11 examiner, the earliest CEOC can request a hearing to approve the disclosure statement is Dec. 15.

Exclusivity extension

CEOC said the proposed exclusivity extension will give it more time to move forward with the amended plan while it seeks to build further consensus.

According to the exclusivity motion filed with the court, CEOC wants to extend its exclusive plan-filing period through March 15 and its exclusive vote solicitation period through May 15, 2016.

A hearing on the exclusivity extension is scheduled for Oct. 21.

Caesars is a Las Vegas-based casino-entertainment company that filed for bankruptcy on Jan. 15, 2015 in the U.S. Bankruptcy Court for the Northern District of Illinois. The Chapter 11 case number is 15-01145.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.